What is the difference, trading VS investing

I’m sitting at my desk trying to learn more about investing and wander why people disagree about the difference between trading and investing.

I hear people talk about trading and investing as if there the same thing, so I did a bit of research. Trading is about timing the market using technical analysis and stock market price movement where Investing is about market analysis, product analysis and business fundamentals.

Investors and traders both have the goal of making as much profit as they can in the shortest amount of time possible.

Now let’s break down their differences.

Is time the difference between trading and investing

Time is not the deciding factor of the difference in trading and investing.

The goal of a trader is to generate returns that outperform buy-and-hold investing by entering a position in a stock and exiting with the maximum amount of profit in the shortest amount of time possible.

Investors sometimes hold stocks for less than a year which can be less time in the market than a trader.

This shows time does contribute to the difference in trading and investing but, it shows trading is about timing the market not the amount of time in the market.

Is process the difference between trading and investing

Traders often use technical analysis (reading charts) to help them estimate when to get in and out of a trade based on price movements of a stock. Investors look at a company’s fundamentals and judge how well the company will do in the future to estimate what price to buy and sell a stock.

This shows investors and traders have opposite values when analysing a stock. Traders look more into price movement were Investors look more at company fundamentals.

Originally published at https://www.seanbarrett.uk on March 19, 2022.